The Malaysian courts have recognised cryptocurrency as a security and a commodity. In the case of
Background Facts
Luno Pte Ltd ("Luno") carries on its business as an online wallet and exchange of cryptocurrencies.BitX Malaysia Sdn Bhd ("BitX Malaysia") is a wholly-owned subsidiary of Luno. It acts as the intermediary regional operating centre of Luno which holds a bank account capable of accepting deposits from registered Luno customers inMalaysia .Robert Ong Thien Cheng ("Robert") has been a registered user of Luno since6 July 2017 . On30 October 2017 , Robert depositedRM300,000 into the bank account held by BitX Malaysia, which was subsequently transferred into Robert's designated Luno e-wallet.- On
1 November 2017 , Robert requested Luno to transfer 11.3 Bitcoins from his designated Luno e-wallet to his Bitfinex e-wallet, to which Luno complied. Bitfinex is a third-party online cryptocurrency exchange. - However, on the same day, due to a technical glitch, Luno mistakenly transferred an additional 11.3 Bitcoins on top of the 11.3 Bitcoins originally requested to be transferred into Robert's Bitfinex e-wallet ("Mistakenly Transferred Bitcoins"). Thereafter, Luno notified Robert of the Mistakenly Transferred Bitcoins by way of its email dated
2 November 2017 , to which Robert acknowledged and admitted that he is required to return the Mistakenly Transferred Bitcoins. - At the end of
November 2017 , Robert offered to return the Mistakenly Transferred Bitcoins in the form ofRM300,000.00 in cash. However, Luno refused Robert's offer due to the Bitcoin's daily value fluctuations. - Luno requested that the Mistakenly Transferred Bitcoins be returned in its original form. Despite his acknowledgement and admission to the fact that he is required to return the Mistakenly Transferred Bitcoin, Robert failed, refused and neglected to do the same.
- Upon Robert's failure, refusal and neglect to return the Mistakenly Transferred Bitcoins, Luno commenced legal proceedings against Robert in the
Shah Alam Sessions Court to recover the following:
(a) The Mistakenly Transferred Bitcoins in its original form; or
(b) The equivalent fiat value of the Mistakenly Transferred Bitcoins at the time of filing, which was
(c) The equivalent fiat value of the Mistakenly Transferred Bitcoins to be calculated on the date of judgment.
Findings by the
Upon its evaluation of the facts of the case, the Sessions Court found that Robert did not have a defence to Luno's claim for the return of the Mistakenly Transferred Bitcoin. The lack of a defence is due to the multiple opportunities offered by Luno to Robert to return the Mistakenly Transferred Bitcoins. Luno's claim was also supported by Robert's acknowledgement and admission that he was required to return the Mistakenly Transferred Bitcoins to Luno.
Cryptocurrency is not illegal in
Robert had contended that cryptocurrency is illegal in
"[26] ... First and foremost, whilst cryptocurrency is not recognised as legal tender in
...
[28] The fact that the 1st Plaintiff is registered as a reporting entity to
[29] This Court is of the view that there is also local legal literature expressly stating whilst cryptocurrencies are not recognised as legal tender, cryptocurrencies are not illegal in
Robert also argued that the Mistakenly Transferred Bitcoins did not belong to Luno and BitX Malaysia, and therefore Luno and BitX Malaysia did not have any locus standi (the right to bring an action to or appear in Court). However, the Sessions Court held that this contention was invalid because the way Luno held cryptocurrency is akin to that of a bank where customers deposit monies. As such, it does not mean that, if the bank had mistakenly transferred monies into a person's account, the bank has no locus standi to initiate an action to recover the monies.
Cryptocurrency falls within Section 73 of the CA 1950
Based on the facts and evidence of the case, the Sessions Court was satisfied that Robert did not dispute that the Mistakenly Transferred Bitcoins did not belong to him. Therefore, the Sessions Court held that Robert was bound under Section 73 of the CA 1950 to return the Mistakenly Transferred Bitcoins to Luno and BitX Malaysia based on the grounds of mistake.
For ease of reference, Section 73 of the CA 1950 is reproduced below:
"Liability of person to whom money is paid, or thing delivered by mistake or under coercion
- A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it."
Although cryptocurrency is not recognised as legal tender, the Sessions Court held that cryptocurrency is a form of commodity as there is value attached to cryptocurrency akin to how value is attached to shares as real money is used to purchase both cryptocurrency and shares.
Subsequently, Robert appealed to the
Findings by the
The crux of Robert's appeal to the
In the
"3. Digital currency and digital token are prescribed to be securities
- A digital currency which-
(a) is traded in a place or on a facility where offers to sell, purchase, or exchange of, the digital currency are regularly made or accepted;
(b) a person expects a return in any form from the trading, conversion or redemption of the digital currency or the appreciation in the value of the digital currency; and
(c) is not issued or guaranteed by any government body or central banks as may be specified by the Commission,
is prescribed as securities for the purposes of securities law."
Accordingly, the
Conclusion
The case of
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